NOT DESIGNATED FOR PUBLICATION
No. 123,972
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
CHRISTOPHER BOOKTER,
Appellant,
v.
WYATT A. KNISLEY, et al.,
Defendants,
and
COMMUNITY STATE BANK,
Intervenor/Appellee.
MEMORANDUM OPINION
Appeal from Montgomery District Court; JAMES R. FLEETWOOD, judges. Opinion filed March 4,
2022. Affirmed.
W.J. Fitzpatrick, of Fitzpatrick & Bass, of Independence, for appellant.
M. Doug Bell, of Hall Levy DeVore Bell Ott & Kritz, of Coffeyville, for intervenor/appellee.
Before BRUNS, P.J., MALONE, J., and RICHARD B. WALKER, S.J.
PER CURIAM: The district court awarded Christopher Bookter damages in a civil
action against Jeromy Brooks, the owner of Chicks Pool Hall (Chicks), and a bartender,
Wyatt A. Knisley. To satisfy the judgment, the district court ordered the pool hall seized
and sold. Community State Bank (CSB) held a first mortgage on the pool hall and
intervened as priority lienholder. Bookter filed a cross-claim against CSB alleging
negligence because it did not enforce the insurance provision in the mortgage contract.
The district court granted summary judgment to CSB on the cross-claim, finding that
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Bookter was not an intended third-party beneficiary of the mortgage contract between
CSB and Brooks. For the reasons stated below, we affirm the district court's judgment.
FACTS
Brooks owned and operated Chicks in Coffeyville, Kansas. CSB loaned Brooks
$45,000 which he secured with a mortgage on Chicks filed on August 29, 2017. On
January 16, 2019, Bookter patronized Chicks and got into a fight with Knisley, the
bartender. The circumstances surrounding the fight are unimportant to this appeal.
Bookter suffered a concussion, multiple contusions and lacerations, a closed fracture of
the maxillary sinus, and a fractured orbital floor of the left eye. Bookter's injuries
required hospitalization and reconstructive surgery.
Bookter sued Knisley for assault and battery and the bar owner, Brooks, under the
theory of respondeat superior. Bookter filed a motion for summary judgment and the
defendants did not respond. On May 8, 2020, the district court granted summary
judgment to Bookter and awarded him more than $380,000 in economic and
noneconomic damages.
On June 26, 2020, the district court ordered the Sheriff to seize and sell the pool
hall to satisfy the judgment. CSB, as priority lienholder, moved to intervene. Bookter
filed a cross-claim against CSB alleging negligence for not mandating that Brooks renew
or secure liability insurance as required by the mortgage. Bookter asserted that he was
entitled to recovery as a "third party creditor beneficiary" of the mortgage contract.
CSB and Bookter both filed motions for summary judgment. On May 14, 2021,
the district court granted CSB's motion for summary judgment and adopted in part the
parties' uncontroverted statement of facts:
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"2. CSB entered into a mortgage on August 28, 2017, with defendant Brooks and
Marilyn Brooks, his wife, for the amount of $45,000.00. The mortgage was recorded on
August 29, 2017, with the Montgomery County Register of Deeds.
"3. The mortgage dated August 28, 2017 contains the following language:
'PROPERTY DAMAGE INSURANCE. The following provisions
relating to insuring the Property are a part of this mortgage:
Maintenance of Insurance. [Brooks] shall procure and maintain policies
of fire insurance with standard extended coverage endorsements on a
replacement basis for the full insurable value covering all improvements
on the Real Property in an amount sufficient to avoid application of any
coinsurance clause, and with a standard mortgage clause in favor of
[CSB]. [Brooks] shall also procure and maintain comprehensive general
liability insurance in such coverage amounts as [CSB] may request with
[CSB] being named as additional insureds in such liability insurance
policies. Additionally, [Brooks] shall maintain such other insurance,
including but not limited to hazard, business interruption and boiler
insurance as [CSB] may require. Policies shall be written by such
insurance companies and in such form as may be reasonably acceptable
to [CSB]. [Brooks] shall deliver to [CSB] certificates of coverage from
each insurer containing a stipulation that coverage will not be cancelled
or diminished without a minimum of ten (10) days' prior written notice to
[CSB] and not containing any disclaimer of the insurer's liability for
failure to give such notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of [CSB] will not be
impaired in any way by any act, omission or default of [Brooks] or any
other person. . . .
"4. Also on August 28, 2017, defendant Brooks signed for CSB an agreement to
provide insurance. The agreement to provide insurance states:
'[BROOKS] ACKNOWLEDGES THAT IF [CSB] SO PURCHASES
ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE
LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE
COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER OF
(1) THE UNPAID BALANCE OF THE DEBT, EXCLUDING ANY
UNEARNED FINANCE CHARGES, OR (2) THE VALUE OF THE
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COLLATERAL; HOWEVER, [Brooks'] EQUITY IN THE
COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PORPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET
THE REQUIREMETS OF ANY FINANICAL RESPONSIBILITY
LAWS.'"
In granting summary judgment for CSB, the district court found that Bookter was
not an expressly intended third-party beneficiary to the mortgage agreement. The district
court found that Bookter may have been an incidental beneficiary of any agreement to
maintain insurance, but as an incidental beneficiary Bookter had no right to recovery
under Kansas law. Bookter timely appealed the district court's judgment.
ANALYSIS
Bookter argues that he is a third-party beneficiary of the mortgage contract
between CSB and Brooks because as a creditor, he would have benefited had CSB
enforced the liability provision in the contract and required Brooks to carry liability
insurance. Bookter argues that CSB violated the terms of the mortgage agreement
because it did not exercise its authority to buy adequate insurance on Brooks' behalf.
CSB argues that Bookter lacks standing and is not a third-party beneficiary
because the contracting parties did not intend to benefit a third party. CSB argues that the
insurance provision at issue is standard language found in mortgages and intended to
protect CSB's interest in the property and the financial security of the borrower.
"Summary judgment is appropriate when the pleadings, depositions, answers to
interrogatories, admissions on file, and supporting affidavits show that no genuine issue
exists as to any material fact and the moving party is entitled to judgment as a matter of
law. The district court must resolve all facts and reasonable inferences drawn from the
evidence in favor of the party against whom the ruling [is] sought. When opposing
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summary judgment, a party must produce evidence to establish a dispute as to a material
fact. In order to preclude summary judgment, the facts subject to the dispute must be
material to the conclusive issue in the case. Appellate courts apply the same rules and,
where they find reasonable minds could differ as to the conclusions drawn from the
evidence, summary judgment is inappropriate. Appellate review of the legal effect of
undisputed facts is de novo." GFTLenexa, LLC v. City of Lenexa, 310 Kan. 976, 981-82,
453 P.3d 304 (2019).
The district court granted summary judgment to CSB, finding Bookter was not a
third-party beneficiary to the contract and thus lacked standing. Parties in a judicial action
must have standing as part of the Kansas case-or-controversy requirement imposed by the
judicial power clause of Article 3, § 1 of the Kansas Constitution. State ex rel. Morrison
v. Sebelius, 285 Kan. 875, 895-96, 179 P.3d 366 (2008). Standing is a jurisdictional
question which determines whether a litigant has a right to have a court determine the
merits of the issues presented. Cochran v. Kansas Dept. of Agriculture, 291 Kan. 898,
903, 249 P.3d 434 (2011). The person asserting the claim—here, Bookter—has the
burden of establishing the standing requirements. Baker v. Hayden, 313 Kan. 667, 673,
490 P.3d 1164 (2021). Whether a party has established standing to bring an action before
a Kansas court is a question of law over which appellate courts have unlimited review. In
re Care & Treatment of Emerson, 306 Kan. 30, 34, 392 P.3d 82 (2017).
A party not privy to a contract has standing to sue as a third-party beneficiary if he
or she establishes that the contract was made for his or her benefit, though not necessarily
exclusively, and the parties intended that he or she benefit as a third-party beneficiary.
Cornwell v. Jespersen, 238 Kan. 110, Syl. ¶ 2, 708 P.2d 515 (1985). Caselaw has
established that there are two types of third-party beneficiaries: (1) an intended
beneficiary and (2) an incidental beneficiary. Only an intended beneficiary has standing
to sue for damages resulting from a breach of the contract. State ex rel. Stovall v.
Reliance Ins. Co., 278 Kan. 777, 793, 107 P.3d 1219 (2005). An intended beneficiary is
one that the contracting parties intended the contract to benefit. In contrast, an incidental
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beneficiary is a beneficiary that happens to benefit from the performance of the contract
but is not the intended object of the contracting parties and "the benefits to him are
merely incidental to the performance of the promise." Cornwell, 238 Kan. at 115.
Parties are presumed to contract for themselves, and their intent that a third person
receive a direct benefit must be clearly expressed in the contract. Noller v. General
Motors Corp., 244 Kan. 612, 617, 772 P.2d 271 (1989); see Stovall, 278 Kan. at 795.
Mere knowledge by the contracting parties that a third party could benefit from the
contract does not imply the contracting parties' intent to benefit the third party. Stovall,
278 Kan. at 795; Noller, 244 Kan. at 617.
Bookter asserts the district court erred in granting summary judgment because he
was a third-party beneficiary. In support he relies on our Supreme Court's decision in
Brown v. Wichita State University, 217 Kan. 279, 540 P.2d 66 (1975). In Brown, an
airplane carrying football players, faculty, and others crashed en route to a football game.
Survivors and personal representatives of those killed in the crash sued as third-party
beneficiaries because the university did not secure passenger liability insurance as
required in its contract with Golden Eagle Aviation, Inc. and federal aviation regulations.
All parties agreed that the plaintiffs were third-party beneficiaries of the contract between
Golden Eagle Aviation and its customer. But Wichita State contended that it was not
Golden Aviation's customer in fact or in law, the contract was not valid because they did
not have authority to sign it, nor did they ratify the contract. In its decision, the Brown
court addressed agency, valid contract creation, and government immunity.
Bookter argues that Brown is instructive because it involves liability insurance,
same as the mortgage contract between Brooks and CSB. CSB argues that it is not useful
because in Brown, the liability insurance was required by law, whereas here the insurance
provision in the mortgage was contractual only. Both Bookter and CSB miss the point.
Brown does rely on the third-party beneficiary doctrine to decide the case but does not
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address the question at issue here—whether Bookter, a bar patron, was a third-party
beneficiary of a mortgage agreement between the bank and the pool hall. In Brown, all
parties conceded that the passengers were third-party beneficiaries of the contract
between the aircraft lessor and lessee so there was never a question before the court about
whether passenger insurance was meant to benefit passengers or their survivors.
Bookter also mentions Keith v. Schiefen-Stockham Insurance Agency, Inc., 209
Kan. 537, 498 P.2d 265 (1972), as support for his argument. In Keith, two widows sued
an insurance agency for not procuring workers compensation insurance as bought by the
deceased employees' employer. Here, again, the Kansas Supreme Court noted that a third
party may enforce a contract so long as the contract was intended to benefit him or her.
209 Kan. at 544-45. The Keith court said that employees and their dependents are
intended beneficiaries of workers compensation insurance. 209 Kan. at 545.
Bookter tries to argue that the general liability insurance was meant to cover
assault and battery, which he claims is the "primary liability risk associated with the
business activity of the pool hall." Bookter says that the risk of personal injury by assault
and battery was known or should have been known by the loan officers and that is why
the bank required the liability coverage. But Brown and Keith do not bridge the gap here.
In both these cases the claimants were found to be intended third-party beneficiaries of
specific kinds of insurance that benefited specific classes of people—passengers and
employees; and not general insurance provided for in a mortgage contract.
Bookter next inexplicably cites a Texas Court of Appeals case, Debes v. General
Star Indemnity Co., No. 09-12-00527-CV, 2014 WL 3384679 (Tex. App. 2014)
(unpublished opinion), to support this proposition. In Debes, a landlord sued a tenant's
property insurer for breach of contract, alleging the insurer failed to pay him under the
policy for his property losses caused by a fire on the leased property. The Texas Court of
Appeals held, among other things, that the landlord was not a third-party beneficiary and
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lacked standing to sue. Debes, 2014 WL 3384679, at *7. In deciding the case, the Debes
court distinguished the facts from P.G. Bell Co. v. U.S. Fid. & Guar. Co., 853 S.W.2d
187 (Tex. App. 1993), where it held that a contractor was a third-party beneficiary and
had standing to assert a breach of contract cause of action against the insurer up to the
policy limits when it obtained default judgment against a subcontractor. Debes, 2014 WL
3384679, at *10. The court explained that in P.G. Bell the insurance policy was a third-
party liability policy. This is the quote Bookter relies on:
"The intent of the parties to a third-party liability contract is to indemnify, and if the
third-party obtains a judgment, the policy confers a direct benefit to a third-party claimant
injured by the insured. As such, a third-party claimant who has obtained a judgment
against the insured for a covered loss under the third-party liability policy has been held
to be a third-party beneficiary to the liability policy." Debes, 2014 WL 3384679, at *10.
The Debes court explained that unlike the policy at issue in P.G. Bell, the
insurance policy in Debes was a first-party property coverage policy intended to protect
against direct losses incurred by the insured, such as injury to the insured or damage to
the property. Debes, 2014 WL 3384679, at *10.
It is unclear how either of these cases supports Bookter's position that he was a
beneficiary to the mortgage. First, Texas state law carries no weight in Kansas. Second,
both Debes and P.G. Bell are distinguishable from Bookter's case because they involve
claimants trying to collect from insurers on existing insurance policies while Bookter is
trying to enforce a bank's mortgage agreement between a bank and a pool hall.
To have standing as a third-party beneficiary, Bookter must show that the
mortgage contract was expressly intended to benefit him, or others in the same class as
him. See Stovall, 278 Kan. at 793; Noller, 244 Kan. at 617. "Before the issue is reached
of whether a third party may directly enforce a contract from which he would benefit, the
third party must show the existence of some provision in the contract that operates to his
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benefit." Hartford Fire Ins. Co. v. Western Fire Ins. Co., 226 Kan. 197, 210, 597 P.2d
622 (1979). The third party need not be personally named but must be identifiable as a
benefited person or part of a class of people meant to be benefited. 226 Kan. at 210.
On page three of the standard, signed mortgage is the property damage insurance
clause at issue. Within that clause, the borrower agrees to purchase fire insurance for the
full insurable value of the property. The borrower also agrees to procure and maintain
comprehensive general liability insurance in such coverage amounts as the lender "may
request." Additionally, the borrower shall maintain such other insurance, including, but
not limited to, hazard, business interruption, and boiler insurance as the lender "may
require." If the borrower fails to carry insurance, the bank, at its option, may consider this
failure an "Event of Default" and exercise its rights and remedies on default.
In another agreement signed by Brooks, the "Agreement to Provide Insurance," it
stated that Brooks would acquire minimum insurance coverage for the loan collateral
including all inventory, equipment, and fixtures. The agreement provided that if Brooks
failed to maintain adequate insurance coverage, then CSB could purchase coverage up to
the balance of the loan. If CSB bought insurance on Brooks' behalf, it would "Provide
Limited Protection Against Physical Damage To The Collateral" and no protection for
Brooks' equity in the property. In the deposition of Jeffrey Stewart, president of CSB, he
explained that the purpose of the insurance requirement was to "help prevent any inability
for the borrower to make payments on [the] loan should they become financially unable
to" and it was not intended to benefit any party other than the lender.
Based on these documents, Brooks secured insurance coverage on September 1,
2017, with United Specialty Insurance Company and provided CSB with a copy of the
policy. The policy contained an exclusion for assault and battery and lapsed after a year.
While it is standard practice for lenders to require borrowers to maintain insurance, there
is no law requiring it. The requirement is solely contractual and up to CSB to enforce.
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CSB did not exercise its right under the agreement to purchase insurance on Brooks'
behalf when the policy lapsed. As a result, there was no liability policy in effect when
Bookter sustained his injuries at Chicks. Even if a policy had been in effect, the coverage
limit would have been $45,000, and it is questionable whether the policy would have
provided coverage for the assault and battery Bookter alleged Knisley committed.
The undisputed evidence before the district court showed that the intent of the
insurance provision in the mortgage contract was solely for the benefit of CSB. This
intent was also expressed in the written agreement to provide insurance that was signed in
addition to the mortgage agreement. Based on the undisputed evidence, Bookter was not
an expressly intended third-party beneficiary of the insurance provision in the mortgage
contract. At best, Bookter may have been an incidental beneficiary of the mortgage
contract to the extent that it required liability insurance, but an incidental beneficiary is
not entitled to recovery under Kansas law. Noller, 244 Kan. at 618; Cornwell, 238 Kan. at
115. Thus, the district court did not err in granting summary judgment to CSB.
Finally, Bookter suggests in his brief that the separate agreement to provide
insurance may have been forged because it was only signed by Brooks and other prior co-
owners of Chicks, and not CSB. The district court rejected Bookter's "unsupported
allegations of forgery," and we agree with that finding. More importantly, the result of
this case would be the same based on the language of the mortgage contract, even if the
separate agreement to provide insurance were not part of the record.
Affirmed.
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